- The Washington Times - Thursday, May 21, 2009

COMMENTARY:

A generation ago, California exemplified its nickname, the Golden State. State spending was less than half per capita, inflation-adjusted, what it is today. Its debt-service ratio was less than a third.

Yet Californians enjoyed one of the finest highway systems in the world and one of the finest public education systems in the country. Water and electricity were so cheap many communities didn’t meter consumption.

Only a few decades have passed, yet California is a dramatically altered place. The tax burden is one of the heaviest in the nation. State government consumes the largest portion of personal earnings of any time in its history and yet can no longer maintain its basic infrastructure. The once legendary California quality of life has declined precipitously and produced a historic first: More people are moving out of California than are moving in.

One thing - and one thing only - has changed in those years: public policy. The political left gradually gained dominance over California’s government and imposed a disastrous agenda of policy changes that now are being replicated at the federal level.

Before the 1970s, California policy aimed at accommodating growth and encouraging prosperity. These priorities changed radically beginning with the “era of limits” announced by Gov. Jerry Brown. Conventional public works were branded “growth inducing,” and it became state policy to discourage construction of highways, dams, power plants and housing.

At the same time, public employee unions acquired unprecedented power to coerce public employee membership, automatically direct public employee earnings into union political coffers and strike against the public.

Radical environmental restrictions have devastated the agricultural, timber and manufacturing industries, culminating in Gov. Arnold Schwarzenegger’s hallmark bill to reduce carbon dioxide emissions 25 percent by 2020 - a goal that can’t be reached even if every automobile in California is junked.

Meanwhile, the state has suffered a radical centralization of revenue collection and decision-making in Sacramento, usurping local prerogatives in every field from education to transportation. This trend has destroyed local accountability and annually causes the misspending of billions of dollars of public funds as Sacramento vainly attempts to force every community into rigid formulas and mandates.

The recall of Gov. Gray Davis in 2003 offered California the last chance to avert the fiscal collapse that now appears imminent. Voters elected Mr. Schwarzenegger, who pledged to stop the “crazy deficit spending,” reduce tax and regulatory burdens, “blow up” the “boxes” and “cut up the credit cards.”

Alas, he did exactly the opposite. He increased the rate of spending that had proved unsustainable under Mr. Davis, began an unprecedented borrowing binge that has tripled the state’s debt-service ratio and has now imposed the biggest tax increase in the state’s history.

As predicted, that tax increase made the deficit worse. The recession had reduced the state’s March sales-tax collections by 19 percent. After Mr. Schwarzenegger increased the sales tax a penny per dollar on April 1, April sales tax revenues plunged 44 percent. The Laffer curve is alive and well.

What can California do? Its credit is stretched to the breaking point, and increasing tax rates now produces decreasing tax revenues. Its deficit vastly exceeds resolution by conventional budget reductions. There is no line item labeled “waste,” and the state’s deficit vastly exceeds the truly obsolete and overlapping programs strewn throughout its budget.

The real savings are in how the state’s money is spent. California pays $43,000 each year to house a prisoner, while many states get by with half that amount. An average classroom accounts for more than $300,000 of public resources but only a fraction actually reaches the students.

Fortunately, California has service-delivery models that once delivered vastly higher levels of service at vastly lower costs before it centralized, bureaucratized, unionized and radicalized them. Tragically, it lacks both the political will and the time required to restore them.

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